Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Nvidia Is on Sale and Cathie Wood Is a Big Buyer

Published 19/09/2022, 12:34
Updated 19/09/2022, 12:34
© Reuters

© Reuters

(Bloomberg) -- A rebound for Cathie Wood’s exchange-traded funds may depend in part on an equally battered large-cap technology stock that’s a long-time favorite of hers -- Nvidia (NASDAQ:NVDA) Corp. 

ETFs controlled by the growth stock proponent’s ARK Investment Management LLC have been loading up on Nvidia shares, purchasing more than 400,000 in September, according to the firm’s daily trading disclosures. ARK funds held more than 675,000 shares as of June 30, according to data compiled by Bloomberg. 

Nvidia shares have plunged 55% this year, the biggest drop among tech stocks with market values of $100 billion or more. Sales growth has slowed at a time when valuations for rapidly expanding companies have come under intense pressure amid soaring interest rates. 

That’s left the stock cheaper than it was last year when its market value was climbing toward $1 trillion. Yet at 32 times projected earnings, it’s still priced above its average over the past decade.

Wood has long been a fan of Nvidia, whose graphics processors are used in personal computers and for complex computing tasks required for artificial intelligence. Shares of the Santa Clara, California-based company have been part of her portfolios since ARK began in 2014, along with electric-car maker Tesla (NASDAQ:TSLA) Inc. 

Still, ARK’s conviction has wavered at times. The firm sold nearly 300,000 Nvidia shares on Aug. 23, the day before the chipmaker reported earnings in which its quarterly revenue forecast fell about $1 billion short of the average Wall Street estimate. ARK representatives didn’t respond to inquiries seeking comment.

“Nvidia is a high-quality company and while it was expensive earlier this year, the correction has made it look pretty attractive at these levels,” said Greg Taylor, chief investment officer at Purpose Investments Inc.

Wood’s affinity for Nvidia was a massive boon as the shares soared from about $4 at the start of 2014 to more than $330 late in 2021, when Nvidia’s market value peaked at more than $800 billion. This year, however, the stock has been a big drag. Nvidia has fallen 60% from a Nov. 29 record, shedding about $500 billion in market value along the way. 

Of course, Wood has been criticized as her portfolios have taken a beating with economic conditions weighing disproportionately on the high-growth, high-valuation stocks she tends to favor. Her $8 billion flagship ARK Innovation ETF has fallen 55% this year.

As for Nvidia, Wall Street has been slashing earnings estimates. Projections for 2023 profits under generally accepted accounting principles have fallen more than 50% over the past three months, according to data compiled by Bloomberg.

Tech Chart of the Day

The Nasdaq 100 Index fell 5.8% last week, as a reading on inflation fueled its biggest weekly percentage drop since January, and the selling was especially severe in Microsoft Corp (NASDAQ:MSFT). The software giant dropped 7.5%, its biggest slump since March 2020. The stock, which is down 27% this year, closed at its lowest level since June.

Top Tech Stories

  • China’s heated rivalry with the US over tech supremacy is adding fresh pain points to the world’s second-largest stock market, as the Biden administration steps up efforts to reduce economic reliance on the Asian nation.
  • The UK’s Financial Conduct Authority published a warning to consumers about Sam Bankman-Fried’s crypto exchange FTX, saying it isn’t authorized by the regulator to offer financial services or products in the country.
  • The App Association brands itself as the leading voice for thousands of app developers around the world. In reality, the vast majority of its funding comes from Apple Inc (NASDAQ:AAPL).
  • Oyo Hotels, the once high-flying Indian startup, is reviving plans for a stock-market debut after cost cuts and a recovery in travel helped it reduce losses.
  • Sea Ltd. is preparing to fire 3% of Shopee employees in Indonesia, part of a broader wave of regional job cuts intended to curb ballooning losses and win back investors. The Singapore-based company will begin notifying affected staff Monday at its cash-burning e-commerce arm, according to a memo seen by Bloomberg News.
  • A slide in the Hang Seng Tech Index took the gauge near oversold territory for the first time since a March rout, indicating extreme bearishness that some technical traders see as a sign of rebound momentum.
  • A hacker published authentic, pre-release footage from development of Grand Theft Auto VI, the most anticipated video game from Take-Two Interactive Software Inc (NASDAQ:TTWO).
  • Li Zexiang grew up in rural China during the Cultural Revolution, when capitalists were the enemy. Now the 61-year-old academic has quietly emerged as one of the country’s most successful angel investors, backing more than 60 startups including drone giant DJI.
  • MicroStrategy Inc. co-founder Michael Saylor, one of the biggest advocates of Bitcoin, said the software update of the Ethereum blockchain serves to boost the outlook for the world’s largest cryptocurrency.
  • If you work in US film and TV, the bad news is arriving almost daily. A multiyear boom in film and TV production, driven by media companies racing to sign up subscribers for their new streaming services, has come to a painful halt, giving way to firings, introspection and handwringing.

©2022 Bloomberg L.P.

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.